Dollar Rebounds on Higher Energy Prices and Rising Yields

The dollar has rebounded from its range lows yesterday and is showing signs of holding its gains in the near term, thanks to higher energy prices and rising long-end yields.

Energy prices have crept higher again due to news that Washington seems uninterested in extending the 60-day ceasefire with Iran. This increase in energy prices is dollar-positive, both through US energy independence and the Federal Reserve's reaction function.

The heavy investment-grade issuance from US hyper-scalers has also contributed to rising long-end yields. While this is not driven by fiscal concerns, a further rise in yields may put pressure on the Fed to act, with the pricing of a September rate hike increasing to 9bp from 7bp.